Drawing upon decades of experience, RAND provides research services, systematic analysis, and innovative thinking to a global clientele that includes government agencies, foundations, and private-sector firms.

The Pardee RAND Graduate School (PRGS.edu) is the largest public policy Ph.D. program in the nation and the only program based at an independent public policy research organization—the RAND Corporation.

Download Free Electronic Document

Research Questions

Will new FDA regulations allowing for the introduction of "biosimilar" drugs (competing versions of complex biologic drugs) in the U.S. prescription drug market reduce health care costs?

Will these regulations encourage competition and lead to lower prices for patients and payers?

Who will benefit the most from the cost savings from biosimilars?

The U.S. Food and Drug Administration (FDA) is expected to release final regulations outlining lower-cost approval pathway requirements for so-called biosimilar drugs. The introduction of biosimilars is expected to reduce prices, albeit to a lesser degree than small-molecule generics. This Perspective combines prior research and recent data to estimate cost savings in the U.S. market. We predict that biosimilars will lead to a $44.2 billion reduction in direct spending on biologic drugs from 2014 to 2024, or about 4 percent of total biologic spending over the same period, with a range of $13 billion to $66 billion. While our estimate uses recent data and transparent assumptions, we caution that actual savings will hinge on the specifics of the final FDA regulations and on the level of competition.

Key Findings

Biosimilars are expected to increase competition and drive down prices, though not as dramatically as less-complex generic drugs did when they entered the market in the 1980s.

The introduction of biosimilars could result in up to $44.2 billion worth of savings—or 4 percent of total spending on biologics—over the next decade.

The magnitude of savings will depend on the specifics of the final FDA regulations, the amount of increased competition, and the acceptance of biosimilars by physicians, patients, and payers.

Savings will accrue to a range of stakeholders in the short term—including physicians and hospitals—though patients and taxpayers will benefit in the long term.

This research was sponsored by Sandoz, a Novartis Company, and conducted within RAND Health, a division of the RAND Corporation.

This report is part of the RAND Corporation perspective series. RAND perspectives present informed perspective on a timely topic that address the challenges facing the public and private sectors. All RAND perspectives undergo rigorous peer review to ensure high standards for research quality and objectivity.

Permission is given to duplicate this electronic document for personal use only, as long as it is unaltered and complete. Copies may not be duplicated for commercial purposes. Unauthorized posting of RAND PDFs to a non-RAND Web site is prohibited. RAND PDFs are protected under copyright law. For information on reprint and linking permissions, please visit the RAND Permissions page.

The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.

The RAND Corporation is a research organization that develops solutions to public policy challenges to help make communities throughout the world safer and more secure, healthier and more prosperous. RAND is nonprofit, nonpartisan, and committed to the public interest.